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Financial sector remained China growth driver as headwinds loom

Wed, Jan 20, 2016 - 10:54 AM

The financial sector continued to fuel China's economic growth last quarter, cushioning a broader slowdown while also raising doubts over the sustainability of that boost amid renewed stock market weakness.

PHOTO: EPA

[BEIJING] The financial sector continued to fuel China's economic growth last quarter, cushioning a broader slowdown while also raising doubts over the sustainability of that boost amid renewed stock market weakness.

Financial services jumped 12.9 per cent in the three months through December from a year earlier, the National Bureau of Statistics said Wednesday. The industrial sector expanded 5.8 per cent, weighing on the 6.8 per cent overall gross domestic product growth rate.

China's services sector output rose 8.2 per cent in the three months, decelerating from the previous quarter while still out pacing the sluggish manufacturing and construction industries as a property investment downturn remains a drag on the economy. The adrenaline shot from financial services may be tough to sustain, adding headwinds for an economy analysts see decelerating to 6.5 per cent growth in 2016.

"Financial services can never become a real key growth driver for a large country like China," said Xia Le, a Hong Kong-based economist at Banco Bilbao Vizcaya Argentaria SA. "When we find that the financial sector is contributing a large part to GDP growth, we need to go back to check the soundness of the calculating method and financial system."

The daily average has slipped to about 560 billion yuan so far this year, according to data compiled by Bloomberg.

The contribution from financial services will likely fade over 2016, said Zhao Yang, chief China economist at Nomura Holdings Inc in Hong Kong. "It will become a drag this year, as the equity trading volume is in negative growth on a year-over- year basis," he said.

Separately, data showed foreign direct investment fell 5.8 per cent in December from a year earlier, while outbound investment climbed 6.1 per cent.